Consumers who use financial cards for purchases benefit from a variety of incentive programs that are offered by the financial institutions that issue the cards. Incentives include rebates, cash rewards, coupons, gift certificates, merchandise, or any type of instrument that a consumer may use to make additional purchases. Because consumers are familiar with many types of incentive programs and have many options when selecting a financial card, financial institutions often compete for new customers based on their incentive programs. Attractive incentive programs with substantial benefits entice new consumers and may increase the likelihood that a consumer will continue using a particular financial card rather than switch to a competing product.
A common incentive program is to issue a reward or rebate based on total spending for all of the consumer's card purchases. For example, a consumer may receive a 2% cash-back reward based on the total amount of purchases made in a year. The disadvantage of such total-spending based programs is that same rebate or reward applies regardless of how or where the consumer spends money. Consumers are not rewarded for making any particular type of purchase. Furthermore, there is no additional or higher level award that is available to consumers.
Some companies have attempted to provide consumers with incentives to make certain types of purchases by rewarding purchases of a particular vendor's product. For example, a consumer holding a branded gas credit card may receive a reward or rebate in relation to his or her gasoline purchases of the applicable brand. The disadvantage of such a program is that the reward or rebate applies to only one type and brand of product. There is no reward (or only a lower level or reduced reward) for other types of purchases. Furthermore, if more than one reward level is offered, the higher level reward is available only on applicable brand purchases that may represent a small fraction of the consumer's total purchases. The consumer's ability to take advantage of the higher level reward is very limited.
Still other programs require consumers to spend a certain amount of money before any rebate or reward is issued. In some instances, a rebate or reward is issued to all consumers that reach a threshold spending limit within a one year period. Some programs may issue rewards or rebates or according to a “tier” structure so that consumers are rewarded differently in relation to their spending levels and types of purchases. Each tier may require a consumer to spend a certain amount of money on certain types of purchases within a certain period of time. Once a consumer's use of the account meets all of the specified conditions, including the spending limit, a reward or rebate is issued. Higher level rewards apply to the higher spending limits. For example, a higher percentage cash-back reward may be applied to purchases above a certain threshold while a lower percentage cash-back reward is applied to purchases below the threshold.
In tiered structures, consumers that spend the most receive the most valuable rewards. For customers that do not reach the spending limit for the higher percentage cash-back reward, the value of the consumer's reward is reduced significantly because a lower percentage is applied to the lower spending amount to determine the value of the reward or rebate. The disadvantage of these types of programs is that a consumer's purchases must meet a number of conditions before a significant reward or rebate is issued. Consumers who purchases do not reach the specified spending levels are not permitted to participate in the incentive program in the same way that consumers who reach the specified spending levels are permitted to participate.
Current incentive programs are limited in a variety of ways and therefore, do not address the varied spending habits and patterns that consumers have. The requirements for receiving rebates or rewards are complex and often require consumers to meet spending limit and spending category conditions in order to receive a more valuable or higher level reward or rebate. Consumers that do not meet all of the conditions, especially the spending level limits, are effectively excluded from participation in the more valuable portion of the incentive program. Therefore, there is a need for an incentive program that allows all consumers to have access to more valuable rewards or rebates without reaching a specified spending level or spending with a specific category. There is also a need for an incentive program that maximizes the reward or rebate to the consumer by maximizing the purchase amount to which the higher level or more valuable reward is applied.